Who are you competing with? Figure that out first

Tags: Knowledge
In an economy where industries are competing with each other, any business must be competing with more competitors than are traditionally perceived. For example, who is the real competitor to a bank? Will you be surprised if I say it is Apple, Alibaba and Google? Apple Pay is giving banks a nightmare, especially for their credit card business. Alibaba is the biggest seller of financial products in China. Google Wallet is another example. The list is more if you take Bitcoin and others.

The story is no different in other businesses. Who is the single largest seller of music today? Apple! What business is Amazon in? Books and other retail items? Wrong. They are also into cloud, giving Microsoft and IBM nightmares.

It is easy to assume that rivals are confined only to those in the same industry, or even to posit that in one’s niche there are none. Think again. There are always alternatives for customers, direct or indirect. Here’s a case in point: a woman seeks to buy something wonderful for her husband for their 25th anniversary. Seriously considering buying him a Cellini watch, she visits several jewellery stores. But wait — maybe he’d prefer a moving work of art, or even a memorable cruise.

Here lies a situational prospect. The shopper isn’t necessarily in the market for luxury watch, but is seeking a suitable gift for her husband. This suggests that the establishment into which the prospect walks first carefully should probe to determine what the customer really wants (a fitting tribute). Then the prospect must be convinced that the shop’s option is the best possible choice. No business should ever assume that the prospect is solely in the market for their offerings.

This calls for finesse. Often, such a prospect initially will request specific information on art or spectacular cruises. Unless the representative probes beyond the obvious, the sale may be lost to the jeweller. Let’s say the jeweller does win, selling a Rs 6 lakh watch. Then the security-conscious couple may need to decide between adding a jewellery endorsement to their home insurance, buying a home safe, or installing an electronic surveillance system.

Now consider the case of a less-fortunate wife who’s just been dumped for a younger woman. Feeling compelled to recapture her self-esteem, she may ponder plastic surgery, cosmetic dentistry and psychotherapy. All represent situational rivals demanding excellent point-of-contact skills to maximise the healing opportunity.

Even in business services like consulting, there always are perceived alternatives, as I have learnt the hard way.

Though pluses and minuses vary, the prospect may perceive each alternative equally viable. These might include creating a specialised staff position, subscribing to a technical database or taking advanced classes. The prospect is ultimately after knowledge and the consultant must convince the executive that his knowledge package is the most cost-efficient.

In the personal investments category, a man might query a stockbroker on hot picks and simultaneously be researching real estate, precious metals and other new opportunities like futures and options. The stockbroker must quell the instinct to flash her up-to-the-minute market savvy without first learning about the prospect’s financial objectives. Similarly, day care centers compete with nannies, and weight-loss programs spar head-to-head with gyms and home fitness equipment. Restless kids spending a week at grandma’s might be spirited off to a beach, amusement park or even a toy store.

Among lower-ticket products and services, advertising must target the situational market. An example is the calorie binge for salad-weary, post-holiday dieters. An ice-cream parlour may well be competing against a cake shop and candy store. Ads can target this market by offering a special “time out” splurge coupon.

And consider a movie theatre, which represents many things: a weekend baby-sitter, a safe first-date destination and a place to crash after work. Each of these needs suggests many indirect competitors — video game arcades, billiard pubs and satellite TV, to name a few. Obviously it pays to do some research, even if informally. Never assume that everyone who contacts you will shop only at your direct competitors. Even loyal customers always have situational options. Sales evangelists often remind us that we must emphasise what it does, not what it is.

The more we learn about the prospect’s or customer’s circumstances, the more we can identify market segments and make our offerings relevant to each. It always comes down to the classic marketing question: “what business are we really in?” Companies that have carefully analysed this usually find that they’re not in a particular industry but in an arena where multiple industries compete, as my partner Rita McGrath has written about in her global best seller, The End of Competitive Advantage.

(The author is CEO and managing director of CustomerLab)


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